Strategy, detail for Provincial Growth Fund investments released

Thursday 2nd August 2018

The government has released more detail on the investments it is looking to make through the $1 billion per year Provincial Growth Fund, and says a large number of private sector firms want to partner up on projects.

At the launch of the Guide to the Provincial Growth Fund in Wellington this afternoon, Regional Economic Development Minister Shane Jones said many of the $1.6 billion in applications the government has received in the five months the fund has been operating don't fit the criteria.

"A lot of them are wanting to address social infrastructure. One example that was thrown to me was fixing up swimming pools - given that my wife was a champion swimmer, I quite like swimming pools, but there's no way that you can pass that off," Jones said. "Once we winnow through a lot of those proposals, I think there will still be a head of steam; not all of them will get over the line."

Jones said releasing the investment strategy today would help regions and the private sector to tailor applications for funding. It has taken some work to socialise the idea of Crown investment in the provinces with the private sector, he said, and he was "reluctant to boost expectations with the private sector too early, until such time we both had the putea [money] and had socialised the idea - to test whether they would believe that what we were saying is true."

A cabinet paper released alongside the investment strategy also shows changes made to the reporting process. Cabinet approved Jones reporting back on the progress of the fund every three to four months, as opposed to every eight weeks, with his first report due by the end of August.

Jones said he was confident he wasn't shortchanging the public by this longer gap between reports, with projects over $1 million to be decided by him along with Minister of Economic Development David Parker, Minister of Finance Grant Robertson and Minister of Transport Phil Twyford, and projects over $20 million to be decided by Cabinet.

Asked why it has taken five months to give this detail on the process, Jones said "you can spend months if not an entire year bedding down every single bureaucratic detail, and then you learn that you're two years into a three-year rule."

"I feel the principles and existing system is always capable of being refined, but I'm an ambitious politician from an ambitious government and part of taking a risk is getting a better balance between risk averseness and ambition," Jones said.

The cabinet paper also includes discussion on the government taking equity shares in projects, which it says Jones and Robertson considered advice on. While the bulk of that information is redacted, it does say that "a number of large private sector firms" want to partner with the government on projects through the fund, and if those progress it would warrant a separate entity to manage those investments.

In the investment strategy, the government says the fund "will not take majority equity stakes" and would generally prefer to fund via debt ahead of grants and ahead of equity.

Still, it says the government "will consider equity investments where this is the best way to achieve a public benefit and/or to best enable recycling of funds", most likely when the project cannot take on more debt, equity-like controls can better mitigate risk, the fund's equity position can be elevated above other equity participants, or the fund could get significant returns from the investment.

The government does not want to specify percentage allocations of funding for regions, but the paper notes that a view on allocation is likely to develop over time as ministers track funded projects and the upcoming pipeline of work.

The strategy document sets out how the Crown wants to work with local government, community groups and the private sector on regional projects. It outlines specific sectors the government wants to see grow, with an emphasis on higher-value exports and environmental considerations.

For the tourism sector, the fund is interested in proposals to spread tourism more equally among the regions, as currently some regions attract the bulk of tourists and consequently have huge pressure on infrastructure. It also invites proposals to add to the value of tourism and the visitor economy, "for example through developing high-value attractions", making the tourism workforce more professional, and improving the productivity of tourism businesses and reducing the environmental footprint of tourism.

The strategy document also points to "digital enablement" as a priority. It asks for proposals which combine infrastructure co-investment for broadband and mobile connectivity, improving digital capability of citizens and businesses, and improving digital employment by introducing technology to existing businesses and supporting digital start-ups, particularly in important regional sectors like farming, tourism and construction.

However, it stresses that digital infrastructure proposals, as other infrastructure proposals, "should not replicate or overbuild existing or planned infrastructure of equivalent capability." An advisory group is developing a framework to help applicants with digital investment proposals, it says.

(BusinessDesk)

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